The question is whether the economic model of a country with a much smaller geography and economy is transferable to a continental nation like Brazil.
The process of change that began on January 1 in Brazil could have a transformative impact on all of South America.
Brazil has always kept to the right of Argentina but, since the return of democracy there, all its presidents have been social-democrats: José Sarney and Fernando Henrique Cardoso, or leftists: Luiz Inácio Lula da Silva and Dilma Rousseff.
More than the Mercosur trading bloc, it is Argentina and Brazil’s shared coastline that has historically kept the two countries close; while the same applies for Chile, Peru and Colombia on the Pacific coast. In simplistic terms, Atlantic countries are generally more European and leftist, while those on the Pacific are more North American and to the right.
Chile’s economic history is South America’s stand-out example of a successful neoliberal model, much like South Korea in Asia: a free-market dictatorship that, maintaining economic orthodoxy, evolved towards democracy.
The military dictatorships in South America did not have the same economic success as Chile’s but the “Brazilian miracle” of 1964-95, with growth rates akin to today’s China, stood out among the rest, and it has given President Jair Bolsonaro the chance to vindicate the country’s military past.
But unlike Brazil in the 1970s — which was statist, albeit authoritarian — the model that Brazil will seek to develop seems more similar to Chile’s, where Augusto Pinochet’s economy was ultra-neoliberal and conservative in education and customs.
Bolsonaro’s vice-president, General Augusto Heleno, has said “human rights are for good people” and that gun-carrying criminals should be shot down even if they are not carrying a weapon because “that’s how you approach an enemy – and we are at war against crime.” In the 1970s, the “war ” was against Communism. Today, it is against crime and criminals are considered a threat to national security.
During the military dictatorship, there were super ministers like Delfim Netto, the star of the ‘Brazilian miracle.’ Bolsonaro is also placing his bets on powerful ministers, for example granting Paulo Guedes the total control of economic portfolios which were previously split among several ministries.
Another key ministry is Foreign Affairs, under the leadership of Ernesto Araújo, a globophobe and admirer of Donald Trump who proposes a more carnal relationship with the United States, in which apparently “the sky is the limit.” He is a follower of the new right philosopher Olavo de Carvalho (about whom an entire column could be written), a man who denounces “cultural Communism” as having taken over the media and Brazil’s education system. To top it off, control of the Education Ministry – which was the portfolio that Evangelicals had their eyes on – was given to the former Brazilian Army Command professor emeritus Ricardo Vélez.
Bolsonaro’s son Eduardo — who in the recent elections scored the highest-ever recorded number of votes for a congressman as he won a seat — visited Chile two weeks ago to explore that country’s pension and retirement system. He celebrated the contribution of the so-called ‘Chicago Boys’ to Chile’s economy during the Pinochet era, “whom you were lucky enough to have in the 1980s, which is why Chile is so well-off financially, and thanks to the Chicago Boys Pinochet kept Chile from becoming the new Cuba.”
Guedes, the new strongman of Brazil’s economy, is also a Chicago Boy. He met last week with the Rio de Janeiro Industry Federation, which receives state subsidies for professional development programmes. “I will stick in a knife into the subsidies,” Guedes threatened. “If I find a willingness to work with me, I will cut them by 30 percent, if not I will cut them by 50 percent.”
The Bolsa Família welfare programme, akin to Argentina’s Asignación Familiar, receives US$5 billion in annual funding of the total US$13 billion outlayed in state subsidies. Guedes has committed to privatise as many state-owned companies as possible, including state television which, if it does not find a buyer, he will close. He also wants to cut subsidies more generally and even sell off the presidential plane. These measures have widespread support among the majority of the population it seems, with 70 percent in a recent poll saying they believe Bolsonaro will “lead Brazil down the right path.”
Since Brazil is half of South America, its eventual success could have a contagious effect on the wider region. The neoliberal boom in South Korea spread to its neighbours, the Asian Tigers, and inspired Deng Xiaoping to move China towards capitalism after Mao’s death.
If Brazil’s economy were successful and were to grow above its forecasted growth rate, a new opportunity would arise for Argentina to sell more to Brazil, our main trading partner. However, there is also the risk that the majority of foreign investments would be diverted to Brazil.
Macri did not make the most of the first three years of his mandate when Brazil, because of its political crisis, had a greater country risk than Argentina. Today, that trend has been reversed and the expectation around Bolsonaro’s presidency has shredded Brazil’s country risk to less than 300 points. Meanwhile, political uncertainty is hitting Argentina, whose own level is now three times greater than Brazil’s.
The question is whether the economic model of a country with a much smaller geography and economy, like Chile’s (which has nine percent of Brazil’s population), is transferable to a continental nation such as the one Bolsonaro is taking control of.
Since the return of democracy, the discourse of Chilean presidents and their economy ministers has been far superior to that of Bolsonaro and Guedes. Last week, the thenpresident-elect inaugurated a policing school which bears his father’s name “Percy Gerald Bolsonaro.” Bolsonaro Sr.’s merits, it seemed, were “to travel to the countryside taking care of people’s teeth” as a (non-qualified) dental practitioner.
It is hard to imagine, in Brazil’s wild tropicalism, that Bolsonaro might bring greater progress than the Europeanism of a sociologist like Cardoso, although, having said that, Lula, with just primary-school education, was a good administrator.
It is the first time since the dictatorship that Brazil’s president does not consider Argentina to be his country’s principal ally. This will be a challenge for Macri – but it is not one without big opportunities either.